InterviewEurope polymer makers must adjust for volatility - SABIC

LONDON (ICIS)--Europe-based polymer producers will need to adapt their business models to cope with ongoing volatility in demand and feedstock pricing, senior executives from SABIC said on Tuesday.

The eurozone crisis has caused demand from key industries such as automotive to decline in many parts of Europe, while feedstock price volatility has put polymer producers under a lot of pressure, according to Dieter Hollmann, SABIC business director for polypropylene (PP) in Europe and Konrad Hellmann, SABIC’s country leader for Germany and west region automotive leader.

They said companies along the entire value chain, including chemical companies and their customers, need to have a strong focus on working capital and inventory management as a way of reducing their exposure to feedstock volatility.

Hollmannsaid: “There is high volatility in all our markets, driven by raw materials and we expect that to continue for a while. There are changes in customer behaviour as people are looking at optimising stocks. It’s a very important element for the whole value chain. Working capital management will be very high on the agenda [for the chemicals industry]. We need to have a very flexible system.”

Production - especially at high cost sites - will also have to be managed carefully in order to keep markets balanced and maintain profitability. “In the next few years we also see that production at sites which are not cost competitive, there will be adjustments to production if necessary - not everyone will continue to operate at “full blast” but they will adjust supply to demand developments in Europe.”

He added that SABIC has no current plans for site closures in Europe because the company has a strong position with “supersites” which continue to improve their cost position.

Hellmann, who is more focused on downstream products such as engineering polymers, said volatility has also affected value-added products: “In engineering resins there has been volatility and the same is true of compounding sites. If necessary we can think about compounding assets because it is no problem to reduce production if necessary.”

He added: “However, we are working hard to fill these assets with new businesses and products. We have no plans to at present as they are still operating nicely.”

To sustain growth through the downturn, companies like SABIC are also focusing on higher performing regions such as emerging markets and reshaping their product portfolios to engage with customers.

Hollmann said: “We are in a global economic downturn and we cannot do a lot about that, but we have to ask how do we, as SABIC, position ourselves to cope with it? Since the downturn we have increased market share in all major markets in the world. This puts us in a good situation because we can offset lower demand in a region like Europe by increasing business in other high-growth areas.”

He said the company’s exports from Saudi Arabia puts it in a very good competitive position in Asia and the Middle East market, as well as cementing its strong position in Europe.

Hellmann added: “Since we can’t influence demand and GDP growth we can influence our portfolio so we’re adding a number of new polymers such as POM [polyacetal], elastomers and polymethyl methacrylate [PMMA] right up the value chain to carbon fibre, all in the Middle East.”